TMI Blog2000 (1) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... l is directed against this order. 2.Shri K.K. Anand, Ld. Advocate appearing for the appellants stated that copper wire on spools was lying in the finishing room pending quality control tests. He submitted that only after the quality control test was done and goods were packed in boxes, the entry in the R.G. I register was made. It was claimed that for the last several years, this was their practice and that it was in knowledge of the departmental officers. As regards the goods, which were found packed in the boxes, he reiterated the claim made before the lower authorities that the goods were manufactured on the same day. The job of packing was not completed due to power failure. It was his claim that the entry could be made at the end of day and that at that time, the entry could have been made, but for the intervention of the officers. He submitted that it has been held in a number of decisions by the Tribunal, following the judgment of the Andhra Pradesh High Court in the case of Southern Steels reported in 1979 (4) E.L.T. (J 402) that where some goods were not entered in the R.G. I register, but where there was no preparation for illegal removal of those goods, there was no wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecked the stock of manufactured goods (as per the department's circular) with the R.G. I entries. The very fact that a similar case was not early made on the assessees establishes that the departmental officers had not examined this area earlier. 7.The R.G. I register, itself, provides for the slight margin of difference between the assessees opinion and the department's impression. The R.G. I register provides for entries to be made for the goods lying in a finishing room before they are brought to the B.S.R. If it was the claim of the assessees that the goods were in the last stage, namely, quality control, they were required to make an entry in this column. It is acknowledged and accepted that they had not done so. 8.The Central Excises Act and Rules framed thereunder, prescribe a number of procedures to be followed by the assessees. Even before the assessees commence production, the rules provide for registration of the manufacturing unit, filing of a ground plan, declaration of particular raw-materials, disclosure of manufacturing formulae, etc. Before clearance, he is required to file details of classification of the products and their valuation. Correct accountal is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded, send it to the proper officer." Any person, who fails to follow the provisions of these two rules, faces penal action under both the rules. The penalty portion of rule 226 reads as under : "Any person, who fails to enter the required particulars within the time prescribed in the relevant rule, or who fails to keep such book, account or register, as the case may be, or to deliver it up to the officer on demand or who obstructs or hinders such officer in making any minute therein or extract therefrom, or coveys (sic) away or conceals it, or destroys or tears out any leaf therefrom, or makes any false entry therein or fraudulently alters any entry therein, shall be liable to a penalty which may extend to two thousand rupees and the goods of which due entry has not been made in such book, account or register shall be liable to confiscation." 11.The other rule under which penalties are attracted is rule 173Q (1)(b). The same reads as under : "Confiscation and penalty. - (1) If any manufacturer, producer, registered person of a warehouse or a registered dealer - (a) xxxx (b) does not account for any excisable goods manufactured, produced or stored by him." 12.Where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s attracted. He argued that in this particular case which is governed by the provisions of self-removal scheme the assessee is authorised to assess the duty himself according to the classification list submitted by him and after doing so he is entitled to remove the goods whenever he chooses. Therefore even if the goods are lying in the factory and the goods are seized at that time, he submitted that as the assessee is entitled to remove the goods at any time he chooses, the seized goods can be considered as goods which the assessee remove in contravention of the provisions of the rules. I am unable to agree with this submission. The expression used is "if any manufacturer etc., removes any excisable goods in contravention of any of the provisions of these rules". This will not in my opinion take in a case where the manufacturer has not removed the goods. The mere fact he is entitled at any movement to remove the goods under the self-removal scheme will not be sufficient to hold that the manufacturer has removed the goods even though the goods are still in the factory. When the self-removal scheme was introduced it was open to the legislature to have amended the rule to make it cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing observations : "We also set aside the seizure of 500 kgs. of phenolic moulding compound as there was no clandestine removal of the same, in which case alone seizure is justified as has been held by the Andhra Pradesh High Court in the case of Southern Steel Ltd., Hyderabad v. Union of India Others (1979 E.L.T. J 402)" 16.There is no discussion as to how the judgment of the High Court was relevant to the facts of the case before the Tribunal. In the case of Garden Silk Mills reported in 1991 (51) E.L.T. 373 also, the Tribunal heavily relied upon the judgment of the High Court. Paragraph 13 of the Tribunal judgment reads as under : "An argument was advanced that the order of confiscation is bad inasmuch as the confiscation can only be ordered where there is a removal without payment of duty and here, there is no removal. In the submissions of the Ld. Advocate, Rule 173Q does not authorise confiscation of goods where they are in the factory and for that, relied upon the decision of Andhra Pradesh High Court in Southern Steel Ltd. v. U.O.I., 1979 E.L.T. J 402, where it is clearly laid down that power of confiscation under Rule 173Q did not extend to goods which were stil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the various authorities did not examine the provisions of Rule 173Q (1)(b) but that dall (sic) subsequent judgments followed the High Court decision which, itself, was confined to examination to clauses (a) and (d) of this sub-rule. 20.We find that the issue of non-accountal was considered by the Tribunal in two judgments, namely, Indian Cork Mills Ltd. and Others v. C.C.E., Bombay reported in 1984 (17) E.L.T. 513 (Tribunal) and Snack Foods Pvt. Ltd. v. C.C.E. reported in 1987 (31) E.L.T. 231 (Tribunal). In the Indian Cork case (supra), some goods were inside the factory, but were not recorded in the R.G. I register. In dealing with the submissions of the Advocate, the Tribunal observed as under: "The contention of Shri Ganeshan that the appellants have only committed a technical breach in not making necessary entries in R.G. I register cannot be accepted. It is not an unknown practice to clear goods more than once on the strength of a same gate pass. In any event the possibility of making use of the single gate pass for clearing goods more than once cannot be altogether ruled out. Neither production of a gate pass nor making a debit entry in the PLA account can absolve th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to instances of contraventions of Rule 173Q(1)(b). 26.It is not that in the present case, there was total lack of intent. As has been observed earlier, the department had stipulated the R.G. I point way back in 1992 which had been publicised in a number of Trade Notices issued by several Collectorates, and should have been in the knowledge of the assessees. Even then they merrily flouted the prescription and continued the wrong practice. Therefore, not only the act of confiscation and imposition of penalty is sustainable but also the quantum of fine and penalty. 27.We, therefore, see no reason to interfere with the orders of the Collector and dismiss this appeal. Sd/- (J.H. Joglekar) Member (T) [Contra per : G.A. Brahma Deva, Member (J)]. -28. I have gone through the proposed order written by my learned brother Shri J.H. Joglekar, Member (Technical). With respect, I am unable to agree with his reasoning as well as conclusion arrived at by him. Hence this separate order. 29.Two issues are involved in this case: Whether goods are liable to confiscation and if the answer is negative, whether penalty can be imposed under Rule 173Q of the Central Excise Rules. 30.The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allahabad reported at 1997 (92) E.L.T. 496 (TBL) and (5) Order No. 1638/91-NB dated 28-12-1995. Shri Jangir Singh, Ld. DR justified the action of the department in ordering for confiscation as well as imposing penalty in terms of Rule 173Q of the Central Excise Rules . 32.The charge levelled against the appellants is that the fully manufactured goods were not entered in RG-I register. According to the appellants, the impugned goods were manufactured on the very day the officers visited and the same could not be entered because of quality test and they used to enter only after quality control test as it was the practice since number of years. Assuming there was a clear failure on the part of the appellants in not entering fully manufactured goods in the RG-I register in time, whether this omission can be considered as a breach with an intention to evade payment of duty to attract penal action in terms of Rule 173Q is an issue to be considered. Rule 173Q and Rule 226 are relevant in this context to deal with the issue involved in this case. I am not reproducing the relevant Rules since both the Rules have been reproduced in the proposed order written by my learned Brother Shri Jogl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the language to construe it otherwise. Decisions referred to by the counsel on behalf of the appellants are of the consistent view in holding that no penal action can be taken under Rule 173Q either in confiscating or imposing penalty unless the goods were removed illegally or final goods should have been in the preparation for such removal or they must have been seized while being transported without recovery or gate passes and without payment of duty. Earlier cases Indian Cork Mills and Snack Foods Pvt. Ltd. referred to in the order written by my learned Brother are not applicable to the facts of this case for simple reason that there was a categorical finding in both cases that goods have been removed illegally. In the circumstances, I am of the view that goods are neither liable to confiscation and consequently no penalty can be imposed under Rule 173Q in the absence of any evidence to show that there was any intention to evade payment of duty. Since there was a failure on the part of the appellants inasmuch as not maintaining proper books of account, they are liable to penalty under Rule 226. Accordingly, I propose to levy penalty of Rs. 2,000/- under Rule 226. In the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice, explained their process of manufacture and procedure of accounting. As regards 906.03 Kgs. of the SEC Wire found packed in 47 card board boxes, the party submitted that the said quantity could not be considered to have been manufactured on account of the fact that the quality control test on the product was not complete. As regards the quantity of SEC Wire found rolled on spools, the submission of the party was more or less to the same effect. The appellants thus maintained that the process of manufacture of the goods could have been considered to be complete only when the final quality control test on the goods was complete and the goods were fully packed for final delivery out of the factory. They further maintained that only after such completion of manufacture could have proper accountal of the goods been made in the RG-I Register maintained by them. They pleaded, further, that their practice was to make a consolidated entry of the day's production in RG-I account after the close of the day and that the production of 5-10-1994 was seized by the officers before such accounting stage. The appellants, thus, denied the allegation of non-accountal of finished goods in RG-1 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the appellants and S/Shri T.A. Arunachalam and S.Ramanathan, Departmental Representatives for the respondent/Revenue. 35.The short question before me is whether in the facts and circumstances of the case, it was legal and proper for the Adjudicating Authority to have confiscated the goods in question and imposed penalty on the appellants under Rule 173Q and whether that Authority ought to have imposed only a penalty on them under Rule 226. 36.The learned Advocates for the appellants have reiterated before me all the submissions made before the two-Member Bench and have cited a catena of decisions of the Tribunal in support of their submission, the gist of which is that neither any confiscation of the goods nor any penalty could have been legally ordered against them under Rule 173Q of the Rules ibid inasmuch as there was no finding of mens rea against them. The thrust of the argument of the learned Departmental Representatives is that even in the absence of the element of mens rea, such confiscation and penalty were warranted under Rule 173Q ibid by the non-accountal of finished goods in the RG-I Register, which involved contravention of Rules 53, 173Q (1)(b) and 226. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-1994 from the appellants, factory) were not found to have been accounted for in RG-I register at the time of the Central Excise Officers' visit to the factory. There can be no doubt that such a case of non-accountal of finished excisable goods is covered by clause (b) of Rule 173Q(1) ibid. Again, it cannot be disputed that such non-accountal involves a contravention of Rule 53 ibid. Clause (d) of Rule 173Q(1) ibid provides for confiscation of excisable goods and imposition of penalty on the manufacturer thereof if the manufacturer contravenes any of the provisions of the Central Excise Rules with intent to evade payment of duty. 39.The question now is whether the appellants' case is covered by clause (b) or clause (d) of Rule 173Q (l). It is pertinent to note that if clause (d) has to be attracted by the instant case, the appellants ought to have contravened any of the provisions of the Central Excise Rules with intent to evade payment of duty. It is equally pertinent to note that a non-accountal of the goods in RG-I register, as contemplated under clause (b) of Rule 173Q(1) is nothing but a case of contravention of Rule 53 ibid. Any case of contravention of any of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.C.E. [2000 (116) E.L.T. 684 (Tri.) = 1999 (32) RLT 494 (CEGAT)] - [Excess goods found vis-a-vis R.G. I - explained by the party at the time of seizure - no evidence to disprove explanation - Confiscation under R. 173Q set aside.] (vii) Kanthal India Limited v. C.C.E. [1999 (108) E.L.T. 385 (Tribunal) = 1999 (31) RLT 547 (CEGAT) - [Excess over R.G.I balance - goods packed in boxes found on production floor, not accounted in R.G. I - No evidence of attempt to evade duty - Confiscation R.F. set aside, but penalty upheld.] (viii) Triveni Engineering Works Company v. C.C.E. [1998 (109) E.L.T. 49 (Tribunal) 1998 (26) RLT 132 (CEGAT) - [Goods lying in factory, not accounted in R.G. I - No attempt to remove them without payment of duty - Confiscation under Rule 173Q held not justifiable.] (ix) Ajay Forgings v. C.C.E. [1999 (31) RLT 768 (CEGAT) - [Excess over R.G.I balance - not entered in R.G. I - Confiscation held not justified, though small penalty imposable for non-accountal in R.G. I] 41.Learned Departmental Representatives have drawn support from the following case law :- (i) Galada Continuous Castings Limited v. C.C.E. [1985 (19) E.L.T. 408 (A.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case especially in the absence of finding of mens rea against them. 43.Learned Departmental Representatives have relied on the case law cited them, in support of the Revenue's stand that the order of confiscation and penalty under Rule 173Q(1)(b) cannot be interfered with on the ground of absence of mens rea inasmuch as intention on the part of manufacturer to evade payment of duty is not necessary for invoking the said clause (b). 44.I have considered the rival submissions and the case law cited. I observe that as rightly pointed out by the learned advocates, the Lower authority ordered confiscation of the goods and imposed penalty on the appellants for contravention of the provisions of Rules 53 and 173G and that the order was passed under Rule 173Q without specifying any sub-rule or clause thereof. Which of the two relevant ciauses - clause (b) or clause (d) of Rule 173Q(1) did the learned Collector invoke against the party? The contraventions found by the Collector were of Rules 53 and 173G. A case of contravention of Rule 53, as I have aiready found, is covered by clause (b) of Rule 173Q (1). A case of contravention of Rule 173G can be covered only b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the necessary entries regarding the production of 5-10-1994 in the RG-I Register at the close of the day but before they could do so the officers visited the factory and seized the goods. This case of the appellants was not successfully countered by the Department, nor have I found any answer to this plea of the appellants, in the learned DRs' submissions. Nevertheless, since the lower authority did not invoke Rule 226 against the appellants and the latter's challenge in the appeal is against the penal action under Rule 173Q, the two sides have become contentious about Rule 226 only at the present stage after the Miscellaneous Order dated 29-7-1997 of the Bench which heard the appeal. 48.The learned DRs have contended that Rule 173Q in Chapter VII-A of the Central Excise Rules shall prevail over Rule 226 in Chapter XIV of the said Rules, in any conflict between the two, by virtue of the provisions of Rule 173A of the said Rules. Therefore, they argue, clause (b) of Rule 173Q (1) has to be strictly interpreted in accordance with the literal text thereof and to be pressed into service regardless of the provisions of Rule 226 ibid. If clause (b) ibid is so interpreted, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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